Global Corporate Venturing Symposium 2017

Day 1

Helping entrepreneurs scale up and globalise was a key element of the first day of 2017’s GCV Symposium in London last month. The first day showed that the corporate venture capital (CVC) industry has taken to heart the message of Sue Siegel of GE Ventures – who declared at the Global Corporate Venturing & Innovation Summit in January that “its time is now” – displaying its confidence and ambition to work with the broader venture community to help entrepreneurs scale up and globalise.

Jonathan Bullock of SoftBank made his first public speech since the $93bn first close of the firm’s Vision Fund, describing how and why it was able to raise the fund, while leading Silicon Valley VCs such as Heidi Roizen of DFJ told delegates how they wanted to collaborate more with corporate partners.

Andrew Hinkly of Anglo American, the first mining company with a corporate venturing program, said he hoped to be part of a sea change in that industry’s thinking, where mining is approached with a high-risk mentality in terms of exploration but more conservatively in respect of the rest of the business. Anglo American’s approach focuses on investing in companies that increase the demand for platinum.

Hinkly said corporate venturing helped a company be more open as a partner and learn to embrace other people’s innovation, and was effective as an integrated part of overall strategy, including R&D and lobbying. He added that having CEO commitment and vision was vital, especially as Mark Cutifani, chief executive of Anglo American, had a strong social impact perspective and was looking for venturing to have a major impact on supply and demand, offer portfolio companies large-scale project opportunities, such as battery storage at mine sites, but also have a role in helping stimulate local investment through building local capability in host countries.

Most corporations have such a primarily strategic goal, according to data shared by academics Ilya Strebulaev and Will Gornall, but link with financial returns as a key performance indicator.

Askew of REV Venture Partners and Kashyap of Microsoft Ventures explained their approaches as examples of best practices. Askew said REV as a general partner was funded by RELX, an Anglo-Dutch media group with a $40bn market capitalisation. REV was “founded in 2000 with a dual mission – make money and be strategic”.

REV invests about $20m to $30m a year and pays performance bonuses – carried interest, or carry, a share of fund returns – to its team on based on profits made by its holding in portfolio companies when they are sold. The about-$1bn value of the portfolio at investment is now worth more than $20bn.

Its strategic mandate was to “help RELX Group navigate successfully through the issues and trends with a potential to disrupt its marketplaces over a three to 10-year horizon”, Askew said. REV’s investment philosophy was based on the premise that “every industry is reinventing to become an information industry”. REV, therefore, was helping RELX “reinvent itself” through investing in portfolio companies around three themes – “living” data, analytics by “thinking machines” and “supercharged humans” able to find the optimal combination with machines.

By contrast, Kashyap said while the Microsoft Ventures name had been around for a few years it had been focused on startup engagement and so it was only last year that the software company launched a formal corporate venture fund under the brand. The startup engagement team has been rebranded Microsoft Accelerator.

He said: “Our view is outward into the market. We focus on the inorganic growth of Microsoft, looking at where we can provide a step function, versus incremental progress. Through our venture fund, we can identify and harness trends by placing both strategic and financial bets with early-stage companies.”

Its deals were designed to help Microsoft across the so-called horizons of investment – optimising the core business, growing the new core of the company, such as its Layer deal, incubating the future, for example with its AirMap investment, and investing in long-term technologies, including artificial intelligence company Element.

Cutting-edge technologies were showcased at the Future Planet Awards, chaired by architect Lord Norman Foster in partnership with Tsinghua Holdings Capital and Global University Venturing.

Meanwhile, there was a fascinating debate between Francois Auque of Airbus Ventures and Jason Ball of Qualcomm Ventures concerning whether we will see flying cars before autonomous vehicles.

Exciting technologies and models of the future are being found across the world, such as fintech in Mexico and Brazil, artificial intelligence in the US and robotics in China and Japan, according to those on the main stage, and in the sector breakout sessions on energy, advanced manufacturing and health, sessions led by GCV contributing editor Tom Whitehouse.

The diversity within CVC was one of the strongest aspects of the community, by ethnicity and gender – our thanks to Silicon Valley Bank for organising the Women in Venture lunch – but also with regards to an openness to new approaches and collaborations with those wanting to put the customer, the entrepreneur, first.

That approach includes new business models and goals, such as the circular economy and impact venturing, which were discussed in a panel led by Charmian Love of CorporateImpactX.

Love’s panel found investors in circular economic models saw significant value in the cost and efficiency savings in product value chains, which goes beyond linear efficiencies. In addition, “substantial value can be unlocked through increased utilisation of assets” and transparency in supply chains leads to better decisions.

Her panellists, Jamie Butterworth, partner at Circularity Capital, Leslie Johnston, executive director at C&A Foundation, Joe Murphy, network manager at Ellen MacArthur Foundation, and Kresse Wesling, co-founder of Elvis & Kresse, said governments might consider taxing waste at higher levels and that “for the circular economy to blossom, government regulators will have to do their part”.

However, corporate goals, such as Unilever’s 2025 sustainability agenda, needed to be in place and would require “massive innovation, and this is a real opportunity for entrepreneurs”.

There is no shortage of entrepreneurs as demographics increasingly force governments in regions with relatively young populations to explore how they can be employed. Parminder Vir, CEO of the Tony Elumelu Foundation in Nigeria, challenged the audience to explore greater reverse innovation as the foundation seeks to take its successful model, supporting 10,000 entrepreneurs from among Africa’s 54 countries, to the rest of the world.

Vir said the foundation’s entrepreneurship program last year attracted about 45,000 applications from the 54 African countries and selected 1,000. The largest area of focus for those selected for the 12-month program was agriculture, and a third were initiatives led by women.

The first day ended with a packed gala dinner and powerful after-dinner speech by Sir George Zambellas, former First Sea Lord – the head of Britain’s Royal Navy – on the importance of learning from mistakes and trusting and working with the young.

Universities are probably those most used to dealing with the young and inspiring their research, innovation and invention, so it was a delight to hear and see so much interaction between university venturers, governments and CVCs.

Day 2

On the second day of the symposium, Akira Kirton, BP Ventures’ managing director of Europe, Middle East and Africa and part of the Asia-Pacific region, took to the main stage after introductory remarks by Janice Mawson, head of the GCV Leadership Society.

BP Ventures investments revolved around both core operations and the company’s vision of a low-carbon future, Kirton said, adding that BP targeted both because: “There are going to be more and more people who are going to need more energy. The world’s population will increase to 9 billion people in the next 20 years and at the same time we really want to help the planet meet this demand.”

Kirton also mentioned mega-partnerships, including the $1bn Oil and Gas Climate Initiative as an important factor. “20% of the world’s oil and gas companies believe in climate change,” he said. “We need to make sure we are meeting society’s energy needs. You do not do venturing just to try to stay incumbent, you do it because you are trying to be an innovative entrepreneur.”

Over the past 15 months, BP has invested in seven new deals, including BiSN, which it brought along for portfolio company meetings with other CVCs as part of the GCV Leadership Society, Drover, Tricoya, a more than $20m investment for sustainable wood supply, Fulcrum Bioenergy, a $30m investment to produce low-carbon jet fuel, and Advanced BioCatalytics. It has also made 12 deployments of portfolio company tech into BP and launched a business development organisation in BP Group Technology to encourage more of these collaborations. Since 2006, BP Ventures has invested more than $325m in 41 deals covering its core business of gas and oil, mobility, bio and low-carbon products, carbon management, power and storage, and digital transformation.

Imran Kizilbash, vice-president of oil and gas company Schlumberger’s Venture Fund, spoke about the increased capital and investment mandate of the fund. Schlumberger Venture Fund had expanded into categories such as renewables, software and the internet of things under Kizilbash’s leadership and its function essentially came down to “being ready to transform if and when required”, he said.

The second day drilled down further into the changing landscape of alternative funding models and raising capital – multi-corporate, VC or direct. How to do it and what helps entrepreneurs most?

Moderator Trond Undheim, director at the MIT Startup Exchange in the US university’s office of corporate relations, pushed the panel on three concepts – structures, networks, and habits – to get at what entrepreneurs need most, how the different forms can help and what might be coming next?

On structures, Undheim said: “There seems to be an emerging business model around multi-corporate CVC. How did that emerge? What happens when several isomorphic structures attempt to get synergies out of each other? Do they themselves have to change, become nimble, or can this new structure operate relatively independently of the mother ship?

Isacke said there was value in being nimble and strategic. “Taking six weeks to make a decision is not good for financial VC-led deals,” she added.

Smith said there was a need to be able to partner in the ecosystem as it would deliver financial rewards, while Gabriel said that while CVC was a “great tool to understand the upcoming technology in order to direct your company strategically for the future”, it was important to be working together.

There were few more powerful opportunities than getting an ecosystem of entrepreneurs to work with a company or for them to help each other and hence a whole region.

In his panel on how smart cities and governement support shape the environment for entrepreneurs and the innovation capital ecosystem, Yesha Sivan, head of Coller Institute of Venture, said one way governments supported initiatives was to throw a lot of money at them!

Paul Morris and Alexandra Meagher from the UK government then explained how, as a result of the UK government accepting it did not understand venture capital, it set up a specialist VC unit under what is now the Department for International Trade along with tax relief that incentivised investment in social enterprises.

Fabienne Herlaut, formerly running transport-focused multi-corporate venture fund Ecomobility Ventures, then gave a concrete example of government actions helping with mobility in Paris. From consultancy EY’s study, she said cities’ attractivity was linked with their ability to appeal to entrepreneurs, in order to speed up innovation and project the image of an innovative and dynamic smart city.

To attract entrepreneurs, therefore, Herlaut said cities should focus on four levers:

• Setting up public-private incubators, accelerators and clusters of excellence.

She gave street parking as an example of “city as a service” and digital parking to improve efficiency.

Other countries are also looking to use venture to help. Brazil has probably developed fastest globally in both areas with Movile, Embraer and Stefanini clear leaders locally and the government supporting an inspiring wider innovation sharing and collaborative approach.

Marco Stefanini, founder and CEO of Brazil-based software and services company Stefanini, in an introduction to a panel led by Jayme Queiroz, investment director at government agency Apex-Brasil, explained how the company had developed a “strong innovation ecosystem” covering some of its 650 corporate customers and business partners, state agencies and universities as well as startups and VC funds and accelerators.

He said: “Stefanini’s consistent growth history has been based both on organic expansion as well as intense M&A [mergers and acquisitions].”

Stefanini developed its Open Startups initiative as a strategic partnership program with startups that had reached product-market fit levels “and that have created disruptive products and technologies synergistic with Stefanini’s offerings”.

Working with these startups allowsed Stefanini to broaden its offer, create dealflow for M&A with less risk and greater strategic fit and “refreshes Stefanini’s culture with a startup way of doing things”. Stefanini had bought 10 companies this way.

He said lessons learned included developing a more flexible M&A strategy covering control to minority positions but be ready to integrate fast and decide when to kill a startup’s culture or preserve it. In addition, understand the different venture models’ pros and cons.

Brazil has developed a somewhat unique approach to innovation ecosystem building, with Stefanini and Naspers-backed e-commerce company Movile looking to create a wider entrepreneurial network around the companies. Queiroz then opened the panel discussion to how the broader economy is becoming more entrepreneurial. With 200 million people and 250 million mobile phones, Brazil is one of the most networked countries in the world and is among the top 10 economies.

Queiroz said Apex-Brasil had tracked more than 5,000 startups and 350 incubators in the country before turning to Carlos Kokron, whom he called the Brazil’s godfather of venture capital for his work at Intel Capital initially and now Qualcomm Ventures, for how things had changed.

Kokron said: “Over the past 10 years everything has improved. Entrepreneurs who used to have to work around the infrastructure now can participate. Corporations are a large part of the change over the past two to three years. There are 250 Brazilian corporations with no startup backgrounds but keen to interact, following the work of Apex-Brasil in hosting the Corporate Venture in Brasil conference the past two years, and have the perfect time to entry given the critical mass of entrepreneurs, and assets are cheap.”

Anderson Thees, who also helped spark this transformation through his work initially at Naspers – including backing Movile – before setting up VC firm Redpoint eVentures, discussed the importance of corporate limited partners, including Cisco and Bertelsman in its first fund, as well as investing directly in startups.

Franklin Luzes, head of MSW Capital, a fund with seven corporate LPs set up by Microsoft, said despite the progress there was still a gap in Brazil for the post-seed, $500,000 to $1m, investment range.

Another doyen of the so-called Bric nations – Brazil, Russia, India and China – then provided the symposium’s final keynote and his lifetime’s lessons in startups and venture – always think outside of the box and pick the right market.